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Filed 4/16/07 Cross, Zalud & Greenfield v. Caruthers CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE

STATE OF CALIFORNIA

CROSS, ZALUD & GREENFIELD et al., Plaintiffs and Respondents, v.

TIMOTHY CARUTHERS, Defendant and Appellant.

D048862

(Super. Ct. No. GIC860778)

APPEAL from an order of the Superior Court of San Diego County, Steven R. Denton, Judge. Reversed.

This litigation results from a dispute between defendant Timothy Caruthers (a chiropractor) and plaintiff Tamara Cross (an attorney) concerning Cross's division of the settlement proceeds obtained by their mutual client from a personal injury lawsuit. Caruthers was unhappy that Cross allocated only $2500 to him and filed small claims actions against Cross seeking additional amounts. Cross (along with Cross's law firm, Cross, Zalud & Greenfield, L.L.P., together Attorneys) responded by filing the instant

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litigation against Caruthers, alleging Caruthers had agreed to accept $2500 by cashing Attorneys' check in that amount but then reneged on the agreement by demanding more and filing the small claims court action. Attorneys' complaint against Caruthers included claims styled as causes of action for breach of contract and fraud, and alleged Attorneys were damaged because they spent time and incurred expenses in responding to

Caruthers's unwarranted demand for payment and his small claims actions against them. Caruthers moved to strike Attorneys' complaint pursuant to Code of Civil

Procedure section 425.16,1 commonly referred to as the anti-SLAPP (strategic lawsuit against public participation) statute. (Equilon Enterprises v. Consumer Cause, Inc.

(2002) 29 Cal.4th 53, 57.) The trial court denied Caruthers's motion as to Attorneys' claims for breach of contract and fraud,2 and this appeal followed.

I

FACTUAL BACKGROUND A. The Lien and Dispute

Caruthers is a chiropractor who treated Mr. Brown for injuries suffered in an automobile accident. Brown pursued a personal injury lawsuit and gave Caruthers a lien on Brown's recovery in the lawsuit to secure payment of Caruthers's bills. The lien was 1 All statutory references are to the Code of Civil Procedure unless otherwise

specified.

2 The court granted the motion insofar as it was directed at Attorneys' cause of action for intentional infliction of emotional distress, and Attorneys do not contest that ruling on appeal.

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acknowledged by Cross, Brown's attorney in the personal injury action. Caruthers ultimately billed Brown $4870 for his services.

Brown's case settled for $7500. Cross sent Caruthers a check for $2500, and both the cover letter and accompanying notation on the check stated it was in full payment of Caruthers's bill. Caruthers objected that he had not agreed to the reduced fee and

demanded full payment of his bill. Cross responded by stating that, if Caruthers did not agree to the reduced fee, Cross would interplead the settlement funds to allow a court to decide the appropriate disposition of the funds.

Although Caruthers apparently responded, Cross wrote to Caruthers two weeks later stating she had not heard from Caruthers, and he had not returned the check; and she therefore assumed he had accepted the $2500 in full payment of his services. She

advised that if Caruthers continued to object she would interplead the funds, but unless she heard from Caruthers she would disburse the settlement proceeds and close the case. Caruthers immediately objected and demanded she either pay his full bill or interplead the settlement funds. Cross responded by giving Caruthers a breakdown of how the settlement funds had been allocated and again asked Caruthers to either agree to the $2500 payment or to return the check so the funds could be interpled. Caruthers responded by offering to reduce his fees to approximately $3200. Cross responded by demanding that Caruthers return the check, and stated she would be filing an interpleader action to determine the amount owed to Caruthers, and that if he cashed the check she would deem that a waiver of his lien and claims against Brown.

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Caruthers cashed the check but struck the notation "full and final settlement" and wrote "protest" on the check. Cross then wrote to Caruthers and stated she had disbursed the remaining funds and Caruthers, by cashing the check, had waived any further rights.

C. The Litigation and the Anti-SLAPP Motion

Nearly three years later, Caruthers filed a small claims action against Attorneys seeking to enforce the lien and collect the balance owed for his services.3 In response, Attorneys filed this action against Caruthers in Superior Court, alleging Caruthers's lien claim had been resolved by an accord and satisfaction, and Caruthers' unwarranted demand for payment and his small claims actions had caused Attorneys damage because they spent time and incurred expenses in responding to Caruthers's small claims actions. Attorneys' complaint was styled as a complaint alleging breach of contract, fraud, and intentional infliction of emotional distress.

Caruthers moved to dismiss Attorneys' complaint under the anti-SLAPP statute, asserting the complaint arose out of petitioning activity within the ambit of the anti-SLAPP statute, thereby shifting to Attorneys the burden to demonstrate probable success on the merits of the action. Caruthers argued Attorneys could not meet that burden and the complaint should therefore be stricken. Attorneys opposed the motion, asserting the claims did not arise from protected activity and, even if the claims were within the ambit of the anti-SLAPP statute, their showing in opposition to the motion was adequate to

3 Caruthers apparently had filed an identical small claims action one year earlier but dismissed it without prejudice.

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establish probable success on the merits. The court concluded Attorneys' claims for breach of contract and fraud were premised on Caruthers's alleged reneging on the accord and satisfaction entered in 2003, and because those claims were grounded in

nonprotected activity, it denied the motion as to those claims. II

LEGAL STANDARDS A. The Anti-SLAPP Law

The anti-SLAPP law provides that "[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim."

(§ 425.16, subd. (b)(1).) The purpose of the statute is to encourage participation in matters of public significance by allowing a court to promptly dismiss unmeritorious actions or claims brought to chill another's valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. (§ 425.16, subd. (a).)

The anti-SLAPP law involves a two-step process for determining whether a claim is subject to being stricken. In the first step, the defendant bringing an anti-SLAPP motion must make a prima facie showing that the plaintiff's suit is subject to section 425.16 by showing the defendant's challenged acts were taken in furtherance of his or her constitutional rights of petition or free speech in connection with a public issue, as

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When the defendant satisfies the first step, the burden shifts to the plaintiff to demonstrate a reasonably probability of prevailing on the merits at trial. (§ 425.16, subd. (b)(1).) In this phase, the plaintiff must show both that the claim is legally sufficient and there is admissible evidence that, if credited, would be sufficient to sustain a favorable judgment. (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 823, disapproved on other grounds by Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 68, fn. 5.; Robertson v. Rodriguez (1995) 36 Cal.App.4th 347, 358.) In making this assessment, the court must consider both the legal sufficiency of, and evidentiary support for, the pleaded claims. (Traditional Cat Assn., Inc. v. Gilbreath (2004) 118 Cal.App.4th 392, 398-399.)

In considering whether a plaintiff has met his or her evidentiary burdens, the court must consider the pleadings and the evidence submitted by the parties. (§ 425.16, subd. (b)(1), (2).) However, the court cannot weigh the evidence (Looney v. Superior Court

(1993) 16 Cal.App.4th 521, 537-538) but instead must simply determine whether the plaintiff's evidence would, if credited, be sufficient to meet his or her burden of proof.

(Wilcox v. Superior Court, supra, 27 Cal.App.4th at pp. 823-825 [standard for assessing

evidence is analogous to standard applicable to motions for nonsuit or directed verdict].) On appeal, we review de novo the trial court's ruling on the motion to strike.

(Bernardo v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322,

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B. The Gravamen of the Claim Controls Application of the Anti-SLAPP Law The Supreme Court has recognized the anti-SLAPP statute should be broadly construed (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 60, fn. 3) and a plaintiff cannot avoid operation of the anti-SLAPP statute by attempting, through artifices of pleading, to characterize an action as a "garden variety" tort or contract claim when in fact the claim is predicated on protected speech or conduct. (Navellier v. Sletten

(2002) 29 Cal.4th 82, 90-92.) Accordingly, we disregard the plaintiff's labeling of the claim (Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 522) and instead must "examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies" and whether the trial court correctly ruled on the anti-SLAPP motion. (Id. at pp. 519-522.) We assess the principal thrust by identifying "the allegedly wrongful and injury-causing conduct . . . that provides the foundation for the claim" (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 189), and if the core injury-causing conduct upon which the plaintiff's claim is premised is protected speech, collateral or incidental allusions to unprotected activity will not obviate application of the anti-SLAPP statute.

III ANALYSIS A. The Gravamen of Attorneys' Claims

The gravamen of Attorneys' complaint asserts they were injured because they were forced to spend time and incur attorney fees in responding to Caruthers's small claims lawsuits, which were meritless because Caruthers was barred from pursuit of any further

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fees by the 2003 accord and satisfaction. Thus, the "wrongful, injury-causing conduct by [Caruthers] on which [Attorneys'] claims are premised" (Martinez v. Metabolife Internat.,

Inc., supra, 113 Cal.App.4th at p. 188) is Caruthers's pursuit of meritless small claims

actions, which is protected activity. Although Attorneys assert these are properly evaluated as claims for breach of contract and fraud, we conclude the nature of the alleged wrongful conduct (as well as the only identifiable injury allegedly flowing from the conduct) shows the gravamen of Attorneys' action rests on protected activity. Indeed, the determination of whether Caruthers prima facie demonstrated Attorneys' suit was subject to section 425.16, by showing that his challenged acts arose from conduct in furtherance of his constitutional right of petition, appears substantively indistinguishable from Navallier.

In Navallier, as here, the plaintiffs' complaint alleged the defendant had entered

into a settlement that released certain claims but thereafter reneged on the release by filing a federal counterclaim that sought to litigate matters covered by the release. The plaintiffs' complaint alleged defendant's repudiation of the release gave rise to claims for breach of contract and fraud. (Navellier v. Sletten, supra, 29 Cal.4th at pp. 86-87.) The court rejected the plaintiffs' attempt to characterize their lawsuit as asserting " 'a garden variety breach of contract and fraud claim,' " reasoning the defendant was "being sued because of the affirmative counterclaims he filed in federal court. In fact, but for the federal lawsuit and [defendant's] actions taken in connection with that litigation,

plaintiffs' present claims would have no basis. This action therefore falls squarely within the ambit of the anti-SLAPP statute's 'arising from' prong." (Id. at p. 90.)

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We conclude, but for the small claims actions, Attorneys would have no claim for either breach of contract or fraud. Indeed, but for the small claims actions, nothing done by Caruthers inflicted any injury on Attorneys, because the only damages alleged from Caruthers's purported breach of contract or fraud were the injuries Attorneys sustained

because Caruthers pursued the small claims actions. Accordingly, the trial court erred in

concluding the present action does not "arise from" protected activities4 because the filing of a small claims action is within the protected activity of petition.

B. Probable Success on the Merits

Attorneys argue that, even if we conclude the claims arose from protected activity, Attorneys' showing met their burden of establishing probable success on the merits, and therefore we should affirm the trial court's order denying the motion to strike. We conclude the gravamen of Attorneys' complaint attempts to state a claim for malicious prosecution (see, e.g., Ramona Unified School Dist. v. Tsiknas, supra, 135 Cal.App.4th at pp. 520-522 [where gravamen of claim was malicious prosecution, court ignores party's labeling and evaluates anti-SLAPP motion as directed at claim for malicious

4 Attorneys assert the complaint cannot be within the ambit of the anti-SLAPP statute because the only protected activity that potentially could have been "chilled" was Caruthers's small claims action, but because that action had already been dismissed, Attorneys' action could have no chilling impact on protected activity. However, the "arising from" prong encompasses any action based on protected speech or petitioning activity as defined in the statute (Navellier v. Sletten, supra, 29 Cal.4th at pp. 89-95), regardless of whether the plaintiff's lawsuit was intended to chill (Equilon Enterprises v.

Consumer Cause, Inc., supra, 29 Cal.4th at p. 58) or actually chilled (City of Cotati v.

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prosecution]), and Attorneys cannot show probable success on the merits of a malicious prosecution claim.

We are not persuaded by Attorneys' argument that assessing the probable success of their claims requires examination of the elements of their pleaded claims for breach of contract and fraud. Attorneys' claim, reduced to its essence, is that Attorneys were injured by Caruthers's conduct because Attorneys had to incur attorney fees and costs to defend meritless small claims actions. Although such damages are recoverable damages for a malicious prosecution claim (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 51), Attorneys cite no authority holding such damages are recoverable either for breach of contract or for fraud. Although a malicious prosecution claim would support recovery for the pleaded injury, Attorneys cannot show probable success on the merits of a malicious prosecution claim arising from Caruthers's pursuit of the small claims actions because "a cause of action for malicious prosecution cannot be grounded on institution of a small claims proceeding." (Pace v. Hillcrest Motor Co. (1980) 101 Cal.App.3d 476, 479.)

Even accepting their pleaded theories at face value, Attorneys cannot show a probability of successfully recovering for the alleged injury (the costs and attorney fees incurred as a result of Caruthers's purported fraud and breach of contract) on the pleaded theories. A breach of contract claim requires proof of recoverable damages. (Acoustics,

Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887, 913.) However, a plaintiff suing for

breach of contract is not entitled to collect as damages the attorney fees incurred to enforce the contract unless the contract contains an attorney fees clause (see generally

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Sessions Payroll Management, Inc. v. Noble Const. Co., (2002) 84 Cal.App.4th 671, 677 [attorney fees are not recoverable unless a statute or contract expressly authorizes them]), and the pleaded contract contains no attorney fee clause.5 The court in Olson v. Arnett

(1980) 113 Cal.App.3d 59, addressing a closely analogous issue, specifically stated: "Respondents contend that when appellant repudiated the settlement, respondents were forced to continue to employ attorneys and that therefore their attorney fees logically flow as damages from the breach. [Citation.] However, to allow respondents to recover their attorney's fees would be contrary to the well-established [American] rule that in the absence of a special statute or a contractual provision for attorney's fees, the prevailing party is not entitled to recover attorney's fees from his opponent. [Citations.] [¶] The instant case is based on a contract, the agreement to settle the underlying action. There is no contention or evidence there was any provision in the contract for attorney's fees. Appellant breached his contract, and respondents had to employ attorneys in order to enforce that

contract. We think this case is not basically different from any other contract action where the nonbreaching party is forced to employ an attorney to enforce the contract but is not entitled to his attorney's fees as damages." (Id. at pp. 67-68.)

5 Attorneys argue that Civil Code section 3281, which provides that "[e]very person who suffers detriment from the unlawful act . . . of [another] may recover . . .

compensation therefor in money, which is called damages," supports recovery of the harm suffered (the cost and attorney fees to defend the small claims actions) from Caruthers's breach. However, neither section 3281 nor section 3333 was intended to expand recoverable damages to include attorney fees. (Woodward v. Bruner (1951) 104 Cal.App.2d 83, 85-86.) Attorneys also assert Civil Code section 3300, providing that contract damages are "the amount which will compensate the party aggrieved for all the detriment proximately caused" by the breach, would permit recovery of attorney fees as damages for breach of contract. However, the law has long been to the contrary. (See, e.g., Scurich v. Ryan (1910) 14 Cal.App. 750, 754-755 [tenant evicted and sued and recovered for violation of covenant of quiet enjoyment but damage award held excessive because attorney fees incurred by tenant not proper item of damage recovery for breach of the lease].)

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Because Attorneys' purported breach of contract cause of action does not identify any compensable damages flowing from the alleged breach, Attorneys cannot show probable success on the merits. (Navellier v. Sletten (2003) 106 Cal.App.4th 763, 776 [claim for breach of contract alleging defendant breached release agreement and sued plaintiff; anti-SLAPP motion granted because only identified damages from breach of contract were nonrecoverable attorney fees.])

Attorneys' showing on the fraud claim is weaker. The fraud claim, which requires (among other elements) proof of damages caused by the misrepresentation (Engalla v.

Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974), suffers the same

deficiency on the damages element as the Attorneys' contract claim. The general rule (with limited exceptions not applicable here) is that attorney fees are not a recoverable item of damages for tort claimants, including claims asserting fraud. (Pederson v.

Kennedy (1982) 128 Cal.App.3d 976, 978-980.) Moreover, Attorneys' fraud claim

suffered from another deficiency. A claim for fraud ordinarily requires proof the defendant made a statement of fact that he did not believe to be true. (Civ. Code, § 1710.) Attorneys' evidentiary showing in opposition to the anti-SLAPP motion was devoid of any evidence that Caruthers affirmatively stated his agreement to accept the $2500 payment in full satisfaction of the amounts owed; to the contrary, he struck the notation "full and final settlement" from the check and instead wrote "protest" on it.6

6 Moreover, to the extent Attorneys' fraud claim is based on an implied agreement to accept the payment in full satisfaction of his bills, that claim is rooted in the species of

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Because there is no evidence either of an affirmative representation or of recoverable damages, Attorneys cannot show probable success on the merits of their purported fraud claim, and the court should have granted Caruthers's anti-SLAPP motion.

DISPOSITION

The order denying Caruthers's anti-SLAPP motion with regard to the breach of contract and fraud causes of action is reversed and the matter is remanded with directions to grant Caruthers's anti-SLAPP motion as to the entire complaint. Caruthers shall

recover costs on appeal.

McDONALD, J. WE CONCUR:

NARES, Acting P. J.

HALLER, J.

form of fraud, " 'something more than nonperformance is required to prove the

defendant's intent not to perform his promise.' [Citations.] . . . [I]f plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury." (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31.) Here, Attorneys' evidentiary showing of intent appears to be limited to showing Caruthers did not adhere to his alleged agreement. Because such showing would require a nonsuit on Attorneys' fraud claim, Attorneys failed to make the requisite showing on the merits as to this element that would suffice to defeat Caruthers's anti-SLAPP motion.

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